I’m coming to the conclusion that BigLaw is not one business, but two different businesses. Some firms (a minority) are in one business, but most firms are in another business entirely.
Note what I am not saying: I’m not saying some firms have one business model and some another. I’m saying something stronger, that a subset of BigLaw firms are in an entirely different business than the rest.
What’s the difference between different models and different businesses? For me, economics says the difference is whether the product/service delivered by Shirts Firms and by Skins Firms are plausible substitutes for one another.
The defining characteristic of two products or services being widely recognized substitutes for one another is not whether you are indifferent between them or whether you view them as alternatives on a single spectrum of possibilities; that’s a matter of personal taste. Rather, the test is posed to the market overall: The test is whether some meaningful cohort of the buyers of that product/service will switch from one to the other in response to price and quality changes and will be, all in all, equally satisfied with either one “depending.”
If you think outside Law Land to commonplace and familiar substitutes in the economy at large, here are some nominees that I hope will illustrate these points:
- Oil vs. gas heat.
- Uber or Lyft vs. a yellow cab
- Trade paperback vs. e-book.
- Bagels vs. English muffins.
- Milk for your coffee/tea vs. cream.
- Merino wool vs. cashmere.
- Red vs. white wine.
- And of course, a nearly endless litany of brand tradeoffs, at least if one can stipulate no fan-boy loyalty to a particular manufacturer:
- Nike vs. Reebok
- Honda vs. Toyota
- H&M vs. Zara
- Pottery Barn vs. Crate & Barrel
- Crew vs. Lands End
- &c.
You get the point, which is, again, not that you are indifferent between all these alternatives (I confess I’m still partial to books printed on paper, bound between covers), but that a material cohort of the market is, and will respond to what are perceived as meaningful disparities in price, availability, selection, etc., by switching from one to the other.
So my hypothesis about BigLaw is that we can categorize most firms quite definitively as Shirts Firms or Skins Firms and clients do not view them as tenable substitutes for one another.
Shall I be specific?
Fascinating topic. May I suggest another reason, based on experience with partnerships in other fields? The people who are in decision-making positions in law firms are overwhelmingly familiar by personal experience with no other business form than the partnership. They largely were partners before the global financial ruckus, and they always assumed that the form was self-sustaining. Being largely or entirely untrained in business management, they have never confronted case studies nor read monographs on the subject. To paraphrase an expert: “If your Universal Solvent for any and all challenges is “stand back and let me lawyer this,” succession in the business is not part of the thought process.
I very much doubt it is a matter of selfishness, or any kind of conflict of interest. Rather, suddenly a new conversation has broken out, and it is conducted in a dialect the tribal elders do not speak, on matters in which they are not expert. And expertise is the very essence of how they think of themselves.
Mark:
A marvelous commentary in all its conjoint thoughts. I’m reminded of what a genuine scholar of music across all its historic genres and forms said upon hearing the Beatles’ performance of “Please, please me:” “Two minutes of perfection.”
My experience solidly underscores your point that the managing partners and chairs of (the vast majority of) these law firms are anything but obtuse or unaware; they are simply witnessing a conversation unfold in an unintelligible and discomforting dialect. It makes them nervous but as they lack the lifelong frame of reference and habits of thinking that would equip them to compose a thoughtful response and form a point of view as to its implications for them, their colleagues, and their firms, they opt to stand mute. I understand and deeply sympathize with this. But if you care about your firm over the next decade or generation, it simply will not do.
Thanks again, as always.